Alan Simpson: I welcome the Minister's statement and her announcement that the Labour party is opening its books in respect of the loans and gifts made to it. Embarrassing as it may have been to Labour party members to discover the we were in receipt of loans, will my hon. Friend confirm that although Labour Members knew next to nothing about those loans, the House knows absolutely nothing about loans and gifts made to the Tory party during the same period? Will she confirm that the terms of Sir Hayden's inquiry will include a 10-year retrospective on loans as well as gifts, and that it will explore the terms of loans and whether they varied during the period of the loan? Will he make recommendations on the most effective way of severing any connection between financial assistance to political parties and the honours system?

Mr. Deputy Speaker: I have no reason for supposing that there has been any lowering of standards by an Officer of this House, and I did not necessarily take that implication from that article, which I also saw. There is a procedure to deal with that matter, and if there is any ground for suspicion, I am sure that it will be brought up in the proper manner with the Commissioner for Standards.

Malcolm Rifkind: I never thought that I would follow the hon. Member for Leyton and Wanstead (Harry Cohen) and have to confess to agreeing with a great deal of what he said. I begin by quite properly declaring an interest in a public company that does business in both Iraq and Afghanistan.
	I welcome the debate not only for the reasons that my right hon. Friend the Member for North-East Hampshire (Mr. Arbuthnot) mentioned, but because, in an extraordinary way, this is the first opportunity since the general election that hon. Members have had to debate Iraq and Afghanistan on the Floor of the House. The conflict has been the single greatest political disaster that the United Kingdom has faced since Suez—indeed, it is far worse than Suez because that was over in a few weeks with relatively few casualties—and here we are, three years into it. It is right that we address not only the financial costs, but the implications for British soldiers. I hope that there will be more opportunities for such debates.
	There is an important question of whether the House should give its approval before this country goes to war. It is equally important that once a war has happened and there are ongoing consequences, the House should have the right to scrutinise properly the way in which the policy evolves, but that has not happened until now.
	The background to the presence of British troops in Iraq is that the war was pre-emptive. The situation was unusual and we went into the war in unlikely circumstances. I do not automatically exclude the right to have a pre-emptive war. Of course, if one knows one is going to be attacked, one does not necessarily wait until that happens before taking action to stop it.
	If there is to be a right of pre-emption that leads to British troops going to a country such as Iraq, with massive costs and casualties, we should bear in mind two fundamental considerations for both this country and the United States. First, if the United States and Britain have the right to take pre-emptive action, so, too, does every other country in the world. Any country throughout the globe that thinks itself threatened can, according to Washington and the present British Government, initiate a war simply in order to prevent one. Secondly, if pre-emptive wars are contemplated, one needs at the very least not just theories, ideas and suspicions, but solid evidence that can be shared with the public—preferably before the war, but at the very least after it—for why the action is appropriate. Those criteria have not been justified. One recalls Bismarck's remark in similar circumstances when he referred to the pre-emptive approach as being rather like committing suicide because of the fear of death. There are very serious consequences when starting a war in such circumstances, but they do not seem to have been taken into account.

Malcolm Rifkind: Yes, the hon. Gentleman is correct. Although that is not my view, it was the official view. However, even my right hon. and hon. Friends had reason to assume that the Prime Minister knew what he was talking about when he said that there was conclusive evidence of weapons of mass destruction and other threats, but that has been seen to be completely bogus.
	One should go to war only in one of three circumstances: because one has been attacked, as we were in the Falklands; because one has a treaty obligation to another country, as was the case in 1939 when Poland was invaded; or in very rare circumstances when there is great international consensus, preferably, although not exclusively, expressed through the United Nations Security Council. Such circumstances arose at the time of the first Gulf war when we were able to put together a massive coalition.
	I do not say that the United Nations must automatically give its approval. Nye Bevan, of all people, once said:
	"If there is one thing worse than my country right or wrong it is the United Nations right or wrong".
	Of course, the United Nations is a fallible institution that is dependent on the will of its individual member states. However, we have gone to war at enormous cost to the Exchequer and more than 30,000 people have died, but we were not attacked, we were under no treaty obligation and there was not the proper degree of international legitimacy.
	Now where do we go from here? I am conscious of the fact that we must look to the future if we are to reduce the huge burden, in terms of both manpower and cost. I do not argue that we should pull out right away because I was against the war. Indeed, in some respects, the opposite applies and I think that, having created this mess, we have a moral obligation to do our best to sort it out. But I have to say that the criterion that has to be applied is whether the continuing presence of British and US troops is making a useful and viable contribution, not only to today and tomorrow but to the eventual stability of that unhappy country.
	There is a fundamental flaw in one aspect of the approach by the British and US Governments. The Secretary of State for Defence confirmed recently that the approach was gradually to hand over to the Iraqi national forces, the police and the army, and then withdraw our troops. In that way, it is hoped, everything will be for the best in the best of all possible worlds. In a normal situation in which one is assisting a Government who are fighting an insurgency, that would be a logical approach. The more the national Government increase their authority and the more they train their own army and police, the more they can be expected to deal with the insurgency themselves. But in the case of Iraq at this moment, that argument misses a fundamental consideration. This is not just an insurgency: it is an increasingly sectarian battle. There are three communities—Sunni, Shi'a and Kurd—all of whom have different interests and none of whom is committed to the concept of a single Iraq. The army and the police force in Iraq are also overwhelmingly Shi'a and Kurd. Therefore, the more powerful the police and the army become in Iraq, the less they are seen as safeguards by the Sunni minority and the more they are seen as an increasing threat to their interests. That is the fundamental inconsistency and why people are increasingly saying that there is no military solution to the problem. The solution, if there is one, has to be found in political terms, not in military terms.
	I said that the situation in Iraq was the worst disaster for Britain since Suez, but it is the worst geopolitical problem for the US since Vietnam—indeed, including Vietnam, which already had an insurgency. Vietnam was already involved in a civil war before the Americans ever arrived. The Americans were trying to stop that civil war in the interests of the then Government in Saigon. The current crisis is entirely of our own making, and so far we have had five horsemen of the apocalypse. First, more than 35,000 people—Iraqis, Americans, British and others—have died. According to Mr. Allawi, some 50 0r 60 more are killed every day. Secondly, we have in Baghdad, the most pro-Iranian Government that Iraq has had for 70 years, which was not one of the prime objectives of US foreign policy. Thirdly, the situation in Iraq is deeply Islamist rather than secularist. Saddam Hussein was a ghastly, vicious tyrant, but he was a secular tyrant. The current situation was no part of the American strategic objective. Fourthly, on terrorism, we have within Iraq—be it for al-Qaeda or other organisations—the greatest recruiting territory for terrorism since the Soviets invaded Afghanistan. Finally, we have the drift into civil war.
	I noticed that the Secretary of State for Defence said last week that civil war was not inevitable or imminent—an important choice of words. He did not say that it was unlikely. He said that it was not happening today, and it was not certain that it would happen tomorrow. But he knows as well as I do that the facts increasingly suggest otherwise. Indeed, the former Iraqi Prime Minister has said that the situation has already reached the point of civil war, and it is difficult to disprove that argument.
	So where do we go from here? I have said that it looks increasingly as if there is no military solution. British troops are doing a fabulous job, but they will not sort out the insurgency in the foreseeable future, and we all know that. The problem is that our Prime Minister and the President of the United States are in denial. It is almost impossible to imagine a combination of circumstances that would now persuade either to acknowledge that it was all a terrible mistake. Whatever happens, they say that it is all part of the great plan, that everything is getting better and that we should just trust them. But the world does not trust them and nor should it.
	A political solution is required with, first, a more convincing form of power-sharing in Iraq, recognising that Sunni fears and concerns cannot be met simply by a 20 per cent. formulaic share in the structure of government. We went through that process in Northern Ireland, where eventually, after many painful years, we realised that power-sharing had to mean precisely that in a substantive sense, if it was gradually to resolve the kind of problems that we all want to address. Power-sharing has to have substance, not form.
	Secondly, the United States and the United Kingdom have to gradually appreciate that, although their withdrawal from Iraq will cause serious problems for the Iraqi Government, it will also remove one of the recruiting agents for those who are creating the insurgency. Arab Governments in the region must do far more than they have done until now to be part of the process of rebuilding Iraq and assisting the work of the democratic Iraqi Government.
	Finally, although we all want a democratic Iraq, that will work only if a President Putin-type figure is in charge of Iraq. I am no fan of Vladimir Putin; some of the things that he has done in Russia have been very bad, but he took over at a period of great instability and fragmentation in Russia, and one of the reasons why he has become so popular with the Russian people—even if not with the rest of us—is that he created a sense of stability and authority. If Iraq could identify an individual who could be given that sort of presidential power, he would not be a dictator in the Saddam sense, although he might be more authoritarian than we or the United States would like.
	That kind of political approach is the last chance for preventing the disintegration of Iraq. Without it, British troops will either be sucked in for an increasingly desperate period or they, and we, will have to conclude that it is approaching the hour when they will have to be brought home.

Dai Havard: As I am not responsible for that matter, I cannot answer the hon. Gentleman's question, but I know that the hon. Gentleman has an interest in Qinetiq activities of various sorts. He is right to identify the problem. Work is going on. I am saying merely that, although the right thing is being done, because of the way it is presented to us, it appears to be a bit rushed and being done a little too late. I do not think that that is true in some respects, but that is how it appears to us because of the way in which the finances are presented to us. I want to be confident that that is not happening; that is part of the reason why the Committee has asked for a more regular mechanism whereby what is actually being done is made visible.

Tobias Ellwood: The hon. Gentleman contradicts the point made by his hon. Friend the Member for North Durham (Mr. Jones).
	The term "civil war" is being mentioned more and more. We have been encouraged by Ministers not to talk about it, yet that is what we are heading towards. We should debate it in the House. What would be the financial consequences for our involvement in Iraq?The elections there were a positive step forward, but they galvanised the parties and the electorate along religious lines and into their ethnic groups. Consequently, the new National Assembly is unable to agree on a Prime Minister and fill the political vacuum. Granted, in certain areas, initiatives have been taken, but in Basra and other places political power rests not just with the local councils, but with the militias. They have taken advantage of the political vacuum. People seek refuge with the militias in Basra and in many major towns because they are scared and do not feel they are being looked after by the official authorities. The British Government say there is no civil war, yet 1,300 civilians were killed last month alone. There are 60 attacks a day, on average, and about 30 bodies are found on the streets every day in Baghdad. How high must the daily death toll rise before the Minister acknowledges that Iraq is in a state of civil war?
	The Minister spoke about contingency planning. I should like to know what will happen if the current plan is not adhered to. A comparison can be made with Bosnia and what happened in that country—three distinct ethnic groups, opinions and differences suppressed by a dictator whose authority was strengthened by outside threats, and when the dictator was removed, the lid came off, opinions could be expressed and the result was civil war.
	I have said previously in the Chamber that there is another possible solution to the situation in Iraq that we have not considered or put to the people of Iraq—that is, the managed partition of Iraq. It already exists. The hon. Member for North Durham says he has visited Iraq. If he has visited the Kurds in the north, he will know that they have their own Prime Minister. They even have their own airline. They are entirely segregated from the rest of Iraq and they have no intention of developing any stronger ties. They are quite happy to run their own affairs.
	The Yugoslav model that we are trying to promote should be abandoned in favour of the Czechoslovakian model. Some form of velvet revolution should be promoted to allow segregation and the development of regional areas, including Basra.

Adam Ingram: My hon. Friend of course completely misconstrued what I was saying. I was not in any way justifying any wrongdoing on the part of people who have their hands on public money in Iraq or anywhere else. I was saying that a balance must be struck when analysing the situation. My hon. Friend made severe criticisms without putting balance to them, so I was merely putting forward such balance. I noted that he still did not congratulate those civilians on all that they are doing to help to reconstruct Iraq.
	Let me return to the points made by the hon. Member for North Devon. There are infrastructure projects worth £30 million in south-east Iraq. There are power infrastructure projects worth £40 million and there is £6.5 million for employment generation. There is £20.5 million for strengthening the operating capacity of the four southern governorates and to encourage private sector growth. Considerable progress is thus being made. However, those significant contributions are part of the contributions made by other Government Departments.
	The hon. Gentleman asked about the capability of the Taliban and the way in which we measure that in Afghanistan. I said when I gave evidence to the Defence Committee that that capacity is difficult to measure because whoever is paying some of those who are likely to mount attacks on any given day determines the uniform that they will put on and the cause for which they will fight. We are trying to get the best intelligence that we can. Our assessment of the situation is that illegally-armed groups are limited. We do not believe that they pose a strategic threat, although we are not saying that what we are doing in Afghanistan is without risk.
	The fact that the insurgency tactics have changed suggests that the groups are failing to make headway. However, of course, we cannot be complacent. We must take the view that the tempo of attacks might go down, stay the same, or go up, which is why such a powerful and potent international force is going into Helmand. We treat threats seriously and take every step to ensure that British forces deployed in Afghanistan are well prepared. Intelligence on what is happening on the ground is critical to that, so we put a lot of effort into it.
	On counter-narcotics, we intend to spend more than £270 million in the financial years 2005–06, 2006–07 and 2007–08 in support of what we call the Afghan strategy. That includes £130 million of Department for International Development assistance that is aimed at creating alternative livelihoods. Between £20 million and £30 million will be going to specific projects in Helmand. We have a significant programme of work to address alternative livelihoods, and although others will also put in resources, only time will tell whether that is sufficient.
	My hon. Friend the Member for Leyton and Wanstead asked whether we were getting good value for our money in Iraq. He should ask the Kurds and Shi'as who were systematically crushed and brutalised by Saddam Hussein and his barbaric regime. Is it worth it to remove tyranny? I think that it is. Is it worth it to give freedom to oppressed people? I think so. There is no question in my mind about what we are doing in Iraq. I think that the continuing price that is being paid for stabilising and bringing freedom to Iraq is worth it, but clearly my hon. Friend has a different view. The way in which he deals with that is a matter for him. I shall address other hon. Members' contributions later, but I wanted to talk about those made by the hon. Member for North Devon and my hon. Friend the Member for Leyton and Wanstead first.
	The debate takes place against the background of the continuing activity of our armed forces in both Iraq and Afghanistan. I would like to take this opportunity to pay tribute to the courage, commitment and professionalism of our armed forces serving in Iraq and Afghanistan in what are often difficult and dangerous circumstances—I know that the whole House will agree. However, as this is an estimates day, I had better make some progress by saying something about finance. The Ministry of Defence is seeking £2 billion pounds in additional resources in the spring supplementary estimate. Just under £1.4 billion of that is for conflict prevention work, including almost £1.1 billion for Iraq and £220 million for Afghanistan.
	Let me turn to the Defence Committee's report because it forms the basis of the debate and major contributions have been made on it. The report made nine conclusions and recommendations, and I would like to deal with each of them in turn. The Committee questioned the level of contingency built into the estimates in relation to conflict prevention. The contingency is there for a very good reason: prudence. Paragraph 8 of the Committee's report recognises that it is necessary to be prudent when dealing with contingency. My Department has to forecast the costs of a rapidly changing operational situation, so the inclusion of a contingency is wholly justified. To put the contingency in context, since last November, business cases totalling well over £100 million have been approved under urgent operational requirement procedures for a range of equipment that is required for both Iraq and Afghanistan, although not all that money will be spent in this year. I know that the right hon. Member for North-East Hampshire will understand that although a business case might be made and one might want to proceed, things do not necessarily happen in the financial year that has been suggested. That can lead to spill-over, so a contingency is important.

Joan Walley: Does my right hon. Friend agree that there is a problem with payment by results? In north Staffordshire, we have a hospital on two different sites. Given the formula by which the hospital is paid by the PCT for the different procedures that are carried, and if there is such an imbalance on top of all the other social inequalities, it stands to reason that we are heading for a deficit. Indeed, we have just reached that situation: we are looking at about 1,000 job losses.

Andrew Lansley: In the context of the point made by the hon. Member for Hastings and Rye (Michael Jabez Foster), the right hon. Gentleman may wish to know that Surrey and Sussex SHA has called for a 3 per cent. top-slicing on its PCT allocations. John Bacon, the transitional lead for London, is taking 3 per cent top-slicing. Thames Valley SHA is taking 3.5 per cent. Why are they doing it? Because they anticipate deficits in their SHAs of more than 1 per cent. this year and probably the same next year. They are proposing, in effect, to renationalise all the growth money in those SHAs in order to start baling out deficits across the system.

John Pugh: I apologise for the fact that my hon. Friend the Member for Northavon (Steve Webb) is not present. He would like to be here, but he is elsewhere working tirelessly for the public good on parliamentary business.
	As I am new, I am sure that hon. Members will excuse or perhaps even welcome the relative brevity of my contribution. I could be tempted into launching a Castro-like tirade in which, having acknowledged the additional funds that the Government have put in, I damn them for disproportionate increases in administration, public relations and publicity, failure to recognise the impact of wage settlements, gold-plating the European Union working time directive, vexing hospitals with politically driven targets, and generally fomenting a culture of change and instability that makes Mao Tse Tung's permanent revolution seem a little tentative. However, that would only provoke Labour Back Benchers to point to the largesse of the Chancellor, falls in the waiting lists and the fact that the net deficit is only about 1 per cent. Instead, let us cut to the quick and have the sensible debate that the right hon. Member for Rother Valley (Mr. Barron) requires us, and prompted us, to have.
	The basic problem with the NHS is how to run a non-profit-making, demand-led service and stick to expenditure limits. That is analogous to the problems that councils will be familiar with when dealing with social services departments—they always overrun, and it is very difficult to manage a demand-led service effectively.
	The Government's first idea was to set targets, but reaching targets requires adequate resources. When resources are not adequate, targets are often achieved by adopting perverse methods, or displacing equally worthwhile goals. The second Government idea, which was embodied in the Healthcare Commission, is the perfectly legitimate idea of pursuing a strategy of assessing clinical outputs in relation to resource allocation. By itself that is not a bad idea, but the key question is how it is pursued. Global figures on the whole NHS are no good. They are relatively uninformative; they tell us something and they are very useful in Prime Minister's questions and so on, but they do not provide a fine-grained picture. Even at strategic health authority and regional level, they are relatively unilluminating, as there will be a lot of funds sloshing around between one cost centre and another.
	The Government appear to have pursued a policy that concentrates on individual cost centres: primary care trusts, hospitals and so on. In some senses this is a new departure, and they have done it in a way that has revealed substantial and worrying variations, and considerable deficits. The moot question for all of us is whether the issue is new and recently discovered, or whether it has previously existed in one form or another, perhaps disguised in the past by sloppy accountancy or the ability to move finance from year to year. It has certainly been disguised by extensive use of brokerage, whereby the SHA would find money for those in deficit and bail them out at the end of the year, and sometimes by plain misdescription of activity, whereby a shortage of secondary care might be dealt with by using some money allocated to primary care, which is then called secondary care.

John Pugh: To be honest, I have not mentioned underfunding at any stage. I have not accused the Government of underfunding the NHS; that is not the problem. [Interruption.] Whatever the hon. Member for Beverley and Holderness (Mr. Stuart) has said, he has said. I will stick with what I wish to say.
	It seems to me that the deficits can reflect a range of factors. They can certainly reflect a lack of previous transparency. We must all acknowledge that. Some trusts have also been slow to adjust to the fact that there is a new ball game, with new rules. Things have happened, brokerage has been abolished and there has been a switch to resource-based accounting and so on. Furthermore, the system lacks transparency at present. The world is not as it seems, and the debts of some trusts are currently disguised by brokerage simply because the SHA accepts that some trusts have a Baldrick-like cunning plan to get out of their current situation. It is an odd fact that in certain areas where there are foundation trusts, it is the PCTs that seem substantially to carry the deficit.
	There is a lack of financial predictability across the piece. There is no three-year plan, as there was for local government. There is top-slicing, as various hon. Members have mentioned. Even now, the tariff for payment by results is not finalised. There is also a constant stream of initiatives. The initiative to move heart and asthma care is good in many respects, but it will have a substantial impact on acute trusts' prospects and budgets.
	There are also some bizarre rules, such as the requirement that certain amounts of work be allocated to the private sector, even where that is not financially advisable. There is a failure to recognise the true cost of new build and private finance initiative in the capital factor. There is a double whammy whereby once a trust runs up a deficit in one year, it starts with a lower budget the following year. That must be the most insane way of dealing with debt since the debtors prison was abolished. In some cases, a deficit will not be due to anything other than poor configuration, but it can also be due to additional costs that are imposed by the correct configuration, but are simply not recognised.
	What all those issues require is something I think most hon. Members would consent to—a responsible causal analysis. What we have had in part is a knee-jerk blame reaction, whereby the problem is said to be poor management. It is arguable whether we can leave that causal analysis entirely to the consultants and turnaround teams. It is such people who have argued others into PFIs in the first place, and who churn around the same data as is already available. I am certainly not impressed by what turnaround teams have done in my neck of the woods, where they have, by and large, looked at the figures that the hospital already has and told it what it already knew.
	There is clearly a difference between a deficit that is accompanied by high output and more and better services—what might be called a virtuous deficit, as more work is being done—and a deficit with no additional level of service, which is clearly unacceptable. The reality is, however, that in order to reduce the deficits, very few alternatives are open to people. One can reduce activity, lose staff or increase efficiency; one of those three things must be done. The requirement that each cost centre should work within its own budget embodies a relatively crude principle of rationing. That is bearable only if we know what entitlements individuals and communities have under existing provision. At the end of the day, our entitlements determine our choices.
	My great fear is that the drive for financial balance across all cost centres will ride roughshod over patient entitlements and lead to damaging reconfigurations, longer patient journeys, trusts crippled by historic debts and a whole lot of political trouble for the Labour party. A better approach, which we should favour and which is true to the NHS ethos, is not necessarily to begin with the question of how we can get existing cost centres into balance so that they can trade solvently with each other, which seems to be the question preoccupying the health service at the moment. Given the money available, we should be asking what citizens are entitled to and how we can best deliver it. We should start with the people, and local people at that, rather than with institutions. We do not have a false choice between an NHS that satisfies the auditors and an NHS that satisfies the citizen—but in the real world it does not follow that the former guarantees the latter. I urge the Secretary of State to proceed with caution, to avoid simple solutions and to recognise that even with reform, one must learn how to reform.
	I shall close by quoting the King's Fund, which has made a pertinent, relevant and on-the-ball comment:
	"The increased level of deficits forecast for NHS organisations this year . . . is worrying—but not surprising. It is essential that the Government does not respond in an ad hoc way but instead introduces a system of support to enable NHS Trusts to respond to emerging financial problems flexibly."
	The key word is "flexibly".

John Hemming: A lot of good points have been made today, particularly by the hon. Member for Wyre Forest (Dr. Taylor). He and the hon. Member for Newcastle-under-Lyme (Paul Farrelly) made the same key point that a lot of trusts bill one another within the health economy, so there is a risk that deficits are concealed for some time. It is very difficult to pin down what the deficits are, and sometimes people do not find out until the end of the year.
	A lot of the problems were predicted, which is backed up by the evidence. I shall quote from "Early lessons from payment by results"—a report produced by the Audit Commission in October 2005 that one would expect the Minister to have read. It says:
	"There are valid concerns that the level of risk inherent in the current policy design, particularly given the pace of implementation and the size of the change is too great."
	In other words, we may not be in meltdown now, but if we keep going in the same way, we are likely to be in meltdown.
	In the current financial year, about £8 billion is dealt with by what is called payment by results, but it is actually a transactional fee, not a market-based system. So Woolwich hospital's underlying costs are higher, because it cannot pay its tax bill and because its PFI costs are so high, but from the health service's point of view, the hospital cannot be shut down, because those costs must still be paid—so chaos ensues. We have chaos at the centre.
	We have had a triple whammy, whereby well-managed Peter is being robbed to pay badly managed Paul. Eastern Birmingham PCT, which covers my constituency, is very well managed—it controls things very effectively—but it has been hit by three things within six weeks of the start of the financial year. First, it has been hit by the phasing out of the purchaser protection adjustment, to which hon. Members alluded earlier. Secondly, it has been hit by top slicing. Although we do not know the final top-slicing figures, they vary nationally between 1.5 per cent. and the 3 per cent. figure that is often quoted. Some people argue that that at least gives them a bit of money to deal with the chaos created by Government policy. Thirdly, we do not know what the tariff will be.
	There is an argument that, if anything should be top-sliced, it should be the tariff, because that is where the real danger lies. There is a good argument for a scheme whereby people aim for a 3.2 per cent increase for non-elective surgery, and if people go above that, transactionally, it is only 50 per cent. of the cost and if they go below it, transactionally, it is only 50 per cent. of the benefit. There is a substantially stronger argument that that figure should be reduced, because it is very clear that the current chaos—as I say, it is not meltdown, but it is likely to turn into meltdown—is caused by too rapid an implementation of the process. If the speed of implementation were reduced, we would have a chance of people managing. The hon. Member for Dartford (Dr. Stoate) made the point that we want to plan expenditure. With payment by results—or transactional payment—people cannot plan such things.
	Let us take the situation that we are in. We have deficits all over the place and we are not quite sure what they are. We will go further down a route that will create more and more deficits. Suddenly, we decide that we will take the money off the PCTs. We are top slicing some of their money. We are removing the purchaser protection adjustment from many of them. We are not telling them what they have to spend in the next financial year, which starts in a couple of weeks. They do not know the cost.
	What do we do if we want to create total chaos? We sack all the senior managers and tell them that they must re-apply for their jobs. That is really clever. For proper financial accounting, the deficit at the end of the financial year must be predicted. If accounting staff are told that they will not have a job if they predict a figure that is in deficit, of course no deficit will be predicted. Suddenly we find that PCTs have been merged and there are massive deficits all over the place, beyond the amount top-sliced by the PCTs. What do we do?
	We encounter a further problem, which was raised by the Royal College of Nursing. If someone is made redundant, their redundancy pay must be included in the accounts for that year, which is why there is such a big rush to make people redundant. If cost savings have to be made all in one year, it is difficult to find savings, so more people are made redundant than need to be.
	We are caught up in a horrible administrative mess. The Prime Minister said that every time he reformed something, he wished later that he had gone a bit further. When everything in the health service settles down, we will look back and think, "No, we did that a little too fast." There is far too much change. The well organised managers who can add up are reeling with the pace of change, and we get more and more change.
	We should look for a couple of things from the Government. First, they should stop reorganising the primary care trusts. They will never get anywhere if they tell all the people who are responsible for dealing with the tight management that they are to be sacked and will have to re-apply for their jobs. That will create chaos. Secondly, the Government should review the rise from £8 billion to £22 billion. I know that they are constrained to do it for the foundation trusts but it is clear that the Audit Commission views that as causing a massive problem. Thirdly, the Government should listen to the points made by the RCN, especially about timing. If everything is done in one year, the result is total misery. We must remember that our concern is with the patients—the people who need that health care. If there is no nurse or doctor to treat them, they do not get treatment. Action is needed from the Govt to stop pushing us down that route.

Andrew Lansley: I went to Crawley and to Reigate prior to the last election, and I have been to the East Surrey hospital. I remember the conversation exactly. The hon. Lady has to deal with the point that my hon. Friend the Member for Reigate (Mr. Blunt) made. Instead of making cheap shots, she might contemplate the expense that she has caused her constituents.
	With one or two unhappy exceptions, it has been a good and important debate, and I congratulate the right hon. Member for Rother Valley (Mr. Barron) on securing it. It comes at precisely the right moment. That was reflected not least in the contributions by Government Back Benchers, who displayed an attitude that was not present, by and large, in mid-November, when we initiated a debate in our own time on deficits. We said then that we believed that £1 billion of gross deficits and several hundred million pounds of net deficits were in prospect this year. The Secretary of State came to that debate and said, in effect, that recovery plans were in place and that it was going to better this year than last year.
	Frankly, the Government have been, and remain, in denial. On 6 December, in front of the Health Committee, the Secretary of State said:
	"We believe that by managing this very closely we will get the net overall deficit back to around £250 million at the end of this year and we will, at the very least, get back to balance by the end of next year."
	One has to wonder what world she was living in at that point, as at about the same time she admitted that the net deficit was rising to £620 million. We now know, although the Government still will not admit it, that subsequent forecasts by strategic health authorities add up to some £755 million. There are some very serious deficits in several trusts, but there are also deficits across a much larger number of trusts. Our latest estimate from board papers suggests that more than 139 trusts are experiencing deficits. It is a system-wide problem.
	The right hon. Member for Rother Valley was right to say that we know what the NHS spends, but we do not know what it costs. The system has to be open and transparent. He has not heard from me, and he will not hear from me, the idea that we should go back to the bad old days of everybody covering everything up. However, he should talk to his Front-Bench colleagues who, far from pursuing a direction of openness and reform, are, through the proposal that primary care trusts should top-slice allocations, moving in precisely the opposite direction. Contrary to shifting the balance of power, they are taking control of the budgets. The Government will renationalise much of the growth money, which will then be spread around the system to try to obscure the financial consequences of necessary reform.
	The hon. Member for Birmingham, Yardley (John Hemming) understands such matters, but reached the wrong conclusion about what is required. It is necessary not to delay the structure of reform, but to complete it consistently. One of the central problems is not too many changes at once—if they were all mutually reinforcing because a clear strategy existed, managers and others in the NHS would understand and accept them. However, they find constant, mutually inconsistent changes impossible to tackle. For example, how is it possible for the chief executive of the NHS to say one thing about the future structure of PCTs and their functions—that they are commissioning, not provider bodies—at the end of July, yet, two months later, they become provider bodies again? The same is happening to allocations. Contrary actions will not deliver successful reform.
	I have every sympathy for the position of the hon. Member for City of York, which requires reform. I suspect that he believes in the structure of reform and that we need devolved decision making and the provider trusts to be held to account for their productivity. The consultants' contract did not achieve that. Simon Stevens, who was special adviser at No. 10 at the time, subsequently admitted that the contracts were negotiated without building in productivity. Provider trusts, like foundation hospitals, should have the freedom to manage their costs more effectively. The Government's imposing of costs lies at the heart of much of the problem.
	There is a 7 per cent. increase in costs on the tariff this year compared with last year. Is it any wonder that the hospitals that receive increases in cash resources find that most of it goes straight out of the door? The tariff takes no account of the impact of the working time directive. The 7 per cent. includes nothing for the costs of implementing the NHS programme for IT, as if hospitals paid nothing for that. It also contains nothing directly for implementing waiting time targets.
	I have asked Ministers which part of the tariff for next year reflects the Government's proposal to move towards 18-week waiting times. I am sure that the Minister has included something in her speech about that. However, I have also received replies to questions that show that, next year, the Government estimate that the move will cost £1 billion, yet that is not included in the tariff. Where, therefore, will those costs be met?
	We heard conflicting and contrasting speeches about the circumstances at the university hospital of North Staffordshire. I shall not comment on that except to say that a central question for the hon. Members for Newcastle-under-Lyme (Paul Farrelly) and for Staffordshire, Moorlands (Charlotte Atkins) is how the University hospital of North Staffordshire can possibly afford rebuilding. That can happen through only two means. Either the tariff—the payment by results—adjusts in future to reflect the costs of building new hospitals and providing new services, or hospitals cut back their activities so dramatically that they are deemed affordable by the Government and Monitor. Clearly, the University hospital of North Staffordshire is moving in the latter direction. It must do that because the Government are telling us nothing about the former possibility.
	The operating rule book for 2006–07 was published at the end of January and it stated that the Government would shortly publish new affordability criteria for PFI projects. That has not happened, just as we do not know what will happen to the tariff after the end of this year. We discussed the possibility of marginal pricing Upstairs in Committee. Time and again, I said that, if the NHS has capacity and primary care trusts have patients who need treating but constrained budgets, one might at least allow for the possibility that they could reach agreement between themselves about marginal pricing of additional capacity towards the end of the year for treating those patients.
	The hon. Member for Dartford (Dr. Stoate) appears to consider it reasonable that Darent Valley hospital should spend 10 months treating patients over trade and then stop. That is not a sensible approach.

Several hon. Members: rose—

Jane Kennedy: I ask hon. Members to allow me to reply to the many points that have been made.
	I take on board the comments of my hon. Friend the Member for Dartford about accident and emergency targets and I agree with what he said about follow-up appointments. On the point raised by my hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins), ambulances are reaching more patients more quickly than ever before, and not just in Staffordshire. She has repeatedly said how important the structure of the ambulance service is in Staffordshire. Ambulance services are extending the range of care that they provide to transform patients' experience and improve efficiency.
	Notwithstanding the comments of the hon. Member for Wyre Forest (Dr. Taylor), we have begun to improve the lives of 17 million patients suffering from long-term conditions such as diabetes, mental health problems and coronary heart disease. Those improvements have been enabled by innovation and new treatment methods, but have largely been delivered in the community through improvements to general practice and general practitioners' services. It is true that we have thousands of extra clinicians throughout the country, old buildings are being replaced with new hospitals or surgeries, and new ambulance stations, ambulances and equipment are being provided. We are upgrading the NHS's IT systems with the largest civilian IT project in the world.
	The increased spending will be backed up by key reforms—payment by results, new work force contracts, PCT commissioning, foundation trusts, independent inspection and regulation and an efficiency plan to deliver better value for money. In addition, we have made significant investments in pay reform for NHS staff. The hon. Member for Mid-Sussex (Mr. Soames) raised the issue of costs. I do not apologise for addressing the scandal of low pay in the health service.

Mark Pritchard: I am grateful for the opportunity to discuss health services in the west midlands and, not least, health services and the health crisis in Shropshire. As the House will know, the Shropshire health economy has been debated many times. Indeed, the Minister herself has replied to questions that have been put before the House on other occasions.
	It is unfortunate that despite the fact that we have wonderful nurses, doctors and health workers throughout the whole of the Shropshire health economy, we now have a deficit of more than £50 million, which is made up of the deficits in Shropshire County primary care trust, Telford and Wrekin primary care trust and the Shrewsbury and Telford Hospital NHS Trust. The deficit will clearly have an impact on front-line patient care.
	We were told in the previous debate that such deficits would not have an impact on patient care, but it is inevitable that they will. Indeed, that is not just my opinion but that of professionals. I meet nurses and doctors all the time. We recently had a successful march in Shropshire, which was called the march for life, and tried to draw attention to the funding crisis in Shropshire. Many nursing professionals and doctors on the march told me that it would be impossible to find the money through efficiency savings alone. The Minister is an honourable lady, and we get on extremely well together. I hope that she will go back to the Secretary of State after the debate and tell her that Shropshire faces a serious problem.
	We heard in the previous debate on health that the situation is often the fault of chief executives. We have had our share of problems with chief executives and chairmen of the hospital trust. Ultimately, however, it is the Secretary of State for Health who approves and appoints the chief executives of trusts, and appoints and agrees to the chairmen of hospital trusts, so the buck must stop with the Secretary of State. That is an important point, because if we accept it the principle of not putting urgent cash injections into trusts can be overcome.
	People in Shropshire say to me, "We've paid the taxes, so we expect the health services." The Prime Minister stands at the Dispatch Box week after week and says, "We've put billions of pounds more into the health service," yet people in Shropshire are being asked to have less of a health service for more taxes. Clearly there is a moral point as well as a political one, because the situation is unfair and completely unjustified. An urgent cash injection for the Shropshire health economy is justified if the Secretary of State approved the senior managers whom she then blames for the funding deficit that we face. Additionally, the Government increased national insurance contributions by more than 12 per cent. That has clearly had an impact on the payrolls of all the trusts that I have mentioned, which has had a knock-on effect on patient services, too.
	We heard today that the University Hospital of North Staffordshire NHS Trust is laying off 1,000 people, many of whom will be nurses and doctors. That will also have an impact on the Shropshire health economy. Many of my constituents journey across the border for treatment. Those who require brain surgery are dealt with in Staffordshire, as are people who require thoracic surgery and complex spinal surgery that cannot be dealt with in Oswestry; there are fine people in that unit. The situation will thus have an impact on my constituents.
	It is of grave concern when the Minister of State, Department of Health, the right hon. Member for Liverpool, Wavertree (Jane Kennedy) admits to a measure of concern about such issues. There is much concern about those issues and it is deeply concerning that everything I have heard from the Government side of the Chamber today—apart from the speech by the hon. Member for Newcastle-under-Lyme (Paul Farrelly), which was thoughtful and brave—has been marked by denial and complacency. No Government, of whatever political persuasion, or however good they are at communication, public relations and marketing, can spin their way out of people's own personal experiences.
	When people come to my surgery, they tell me of the experiences that they have had at the local hospital. Many of them join me in praising the professionalism of the staff, both on the front line and in the back office, the porters and those working on the switchboard. Nobody underestimates the professionalism and commitment of hospital staff, but people are concerned when they are turned away after they have gone in for surgery. We know that the Minister of State said earlier that nobody waits longer than six months for an operation, but the NHS website—a Government website—today states that the figure has doubled. So I am puzzled by her remarks.
	It is not only acute services that will be affected. I am very concerned that the accident and emergency unit at the Princess Royal hospital in my constituency will be cut. It is no good just putting an accident and emergency sign over the door and saying that the hospital has an accident and emergency department. It needs to be fully functioning, and my constituents are concerned that we will lose the doctor-led unit and end up with a nurse-led unit. The nurses do a wonderful job, and paramedics are getting more and more training—they too do a marvellous job—but they cannot replace the expertise and experience of surgeons on site to deal with emergency admissions.
	I know that the Minister has visited Shropshire before, and she has kindly accepted a new invitation to come to the hospital in my constituency in the near future. Shropshire is one of the largest inland counties in England, so however quickly and ably ambulance drivers drive, time costs lives, whether from cardiac arrests, aneurysms or severe asthma attacks. I hope that the Minister will give me an assurance this evening that the accident and emergency department at the Princess Royal hospital will remain fully functioning.
	The accident and emergency unit has important links to the paediatric services at the hospital. East Shropshire, including Telford and the Wrekin area, is the part of Shropshire with a younger population, so I hope that the Minister will give an undertaking that the children's services will not be affected.
	I wish to widen the debate to primary care services, because I am concerned about the knock-on effects on the provision of drugs, especially for the treatment of Alzheimer's disease. Many constituents tell me that they need my help to obtain Alzheimer's drugs for their grandparents or parents. It is a growing issue, and PCTs have reduced funding for it as they face other financial pressures. The same issue applies to anti-TNF drugs, and I hope that the Minister will give a commitment this evening to meet women representing Herceptin 4 Shropshire Now. She will be aware of the group, which represents women who are desperate to receive the drug to prolong their lives and make them more comfortable as they face breast cancer.